House Prices, Wealth Effects and Labour Supply

Abstract

We examine the impact of house prices on labour supply decisions using UK microdata. We combine household survey data with local‐level house price measures and controls for local labour demand. Our microdata also allow us to control for individual level income expectations. We find significant house price effects on labour supply, consistent with leisure being a normal good. Labour supply responses to house prices are concentrated among young married female owners and older owners. This finding suggests that house prices affect the decisions of marginal workers in the economy. Our estimates imply that house prices are economically important in the participation decisions for these workers.

Retirement date effects on saving behavior: Endogenous labor supply and non‐separable preferences

“…The literature has shown that increases or expected future increases in wealth lead agents to reduce the hours they work (Joulfaian and Wilhelm ; French and Cheng ; Imbens et al . ; Disney and Gathergood . We show that when individuals reduce the hours worked before retirement in response to an increase in the expected age of retirement, for zero or small negative cross derivatives of the the utility function with respect to consumption and leisure, the decrease in saving is far larger than if they worked the same hours as before.…”

How house price appreciation affects homeowners' labour force participation

“…In addition, some similar research (Disney and Gathergood, ; He, ; Johnson, ) used house value to investigate the effect of house price variations on labour supply. In the context of China, house price appreciation is the major component of house value (Gan, ).…”

“…Henley () found significant reductions in working hours for both men and women in response to housing capital gains. Disney and Gathergood () found that the wealth effect generated from increasing house prices significantly reduced labour force participation (LFP) in the UK. However, Johnson () found little evidence of a positive relationship between house prices and LFP of married women in a US metropolitan area.…”

Labor Market Effects of Credit Constraints: Evidence from a Natural Experiment

“…We extend the standard two-period life-cycle model of Rossi and Trucchi (2016) to a three-period set-up and, following Hurst and Stafford (2004) and Bhutta and Keys (2016), explicitly incorporate home ownership, mortgage borrowing, house price appreciation, home equity extraction, and collateral constraints to capture the key features of the Texas housing 7 A more distinct stream of research has explored the relationship between the broader housing market and labor supply, generally finding negative wealth effects of house price growth, consistent with leisure being a normal good (Atalay, Barrett, & Edwards, 2016;Disney and Gathergood, 2013;Milosch, 2014;Fu, Liao, & Zhang, 2016;Bottazzi, Trucchi, & Wakefield, 2017;Zhao and Burge, 2017). But a consensus on the effect of house price growth on labor supply remains elusive.…”